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V0819-20 13 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · rehabilitación de edificaciones

10% VAT rate for building renovation subject to qualitative and quantitative requirements

A taxpayer has requested clarification regarding the VAT rate applicable to a series of works in a residential building. The Directorate General for Taxes (DGT) explains that to apply the reduced 10% rate for renovation, specific cost and nature-of-works conditions must be met, or alternatively, the criteria for renewal and repair must be satisfied.

The question raised

Value Added Tax rate applicable to the aforementioned execution of works.

The DGT's ruling

To apply the 10% rate for rehabilitation, the works must result from a direct contract between the developer and the contractor and fulfill two phases: a qualitative phase, where more than 50% of the cost consists of consolidation, structural elements, facades, roofs, or analogous/connected works, and a quantitative phase, where the cost exceeds 25% of the value of the building (excluding the land). If it is not rehabilitation, the 10% rate for renovation and repair could apply if the recipient is a natural person or a community of owners, two years have passed since construction, and the cost of materials does not exceed 40% of the tax base.

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